Lipid domain formation induced by annexin was investigated in mixtures of phosphatidylcholine (PC), phosphatidylserine (PS), and cholesterol (Chol), which were selected to mimic the inner leaflet of a eukaryotic plasma membrane. Annexins are ubiquitous and abundant cytoplasmic, peripheral proteins, which bind to membranes containing PS in the presence of calcium ions (Ca(2+)), but whose function is unknown. Prompted by indications of interplay between the presence of cholesterol in PS/PC mixtures and the binding of annexins, we used Monte Carlo simulations to investigate protein and lipid domain formation in these mixtures. The set of interaction parameters between lipids and proteins was assigned by matching experimental observables to corresponding variables in the calculations. In the case of monounsaturated phospholipids, the PS-PC and PC-Chol interactions are weakly repulsive. The interaction between protein and PS was determined based on experiments of annexin binding to PC/PS mixtures in the presence of Ca(2+). Based on the proposal that PS and cholesterol form a complex in model membranes, a favorable PS-Chol interaction was postulated. Finally, protein-protein favorable interactions were also included, which are consistent with observations of large, two-dimensional, regular arrays of annexins on membranes. Those net interactions between pairs of lipids, proteins and lipids, and between proteins are all small, of the order of the average kinetic energy. We found that annexin a5 can induce formation of large PS domains, coincident with protein domains, but only if cholesterol is present.